Guidance Note on The Liberalization and Management of Capital Flows

This note provides operational guidance to staff on the use of the Fund’s institutional view (IV) on the liberalization and management of capital flows. The IV establishes a framework for consistent policy advice and assessments of members’ capital flow policies when relevant for surveillance. The IV does not alter the rights and obligations of members under the Fund’s Articles of Agreement or other international agreements. The IV has no mandatory implications for the Fund’s financing role. The IV rests on the premise that capital flows are desirable as they can bring substantial benefits for countries, but they may also generate risks. Capital flow management measures (CFMs) or measures that are both CFMs and macroprudential measures (MPMs), i.e., CFM/MPMs, can be useful in certain circumstances but should not substitute for warranted macroeconomic adjustment. The IV aims to help countries reap the benefits of capital flows, while managing the associated risks in a way that preserves macroeconomic and financial stability and does not generate significant negative outward spillovers. Staff should discuss capital flows and related policies in surveillance when these are macro-critical or when spillovers from those policies significantly influence the effective operation of the international monetary system. This note combines, elaborates, and clarifies all previous IV guidance, replacing the 2013 guidance note and the 2015 note on further operational considerations. It also provides guidance on the new elements introduced in the 2022 review of the IV.